Is your organization ready to create social value?

A recent study at Kansas State led to the development of the Corporate Social Entrepreneurship Scale, an instrument to help managers determine whether their organizational climate is conducive to creating social value.

As our global society faces key environmental and social challenges, organizations are facing increased demands from customers, suppliers, employees, and community groups to devote resources to help solve these challenges. Some organizations, such as nonprofits, are focused almost exclusively on creating social value, whereas others, such as profit-maximizing firms, may view it as a reputation-enhancing, pleasant by-product of their activities. Most organizations exist as variants somewhere in between these extremes.

In recent years, there has been a decided increase in the emphasis of social value creation by all organizations, including for-profit organizations because:

Customers want to buy from these companies.

Employees want to work for them.

Investors are willing to invest in them.

Entrepreneurs hope to start them.

Seeking to leverage this growing customer desire for socially conscious capitalism, for example, Bono and Bobby Shriver created the Product Red campaign, a licensed brand that partners with private companies such as Nike, American Express, and Apple to raise money for and awareness about AIDS in Africa. Studies have shown that meaning is one of the most important job attributes to millennials and that companies known for their corporate social responsibility tend to attract better talent.

Even investors have become more conscious about the social value of the activities responsible for generating the returns they are seeking. For example, both Toms Shoes and Warby Parker have emerged in the last decade in well-established industries, but each already boasts market capitalization of over $1.2 billion. The rise of socially conscious entrepreneurship is also evident in the emergence of social entrepreneurship and the B Corp movement, a legal organizational form in 27 states at last count. Thus, the explicit creation of social value as an objective in itself, and not merely a pleasant by-product of the organization’s activities, is clearly on the rise.

With this increased emphasis on making the organization’s social value proposition more explicit comes new challenges. Such dilemmas suggest that social businesses may have to be even more entrepreneurial than profit maximizing businesses (PMBs) in order to identify opportunities that not only yield profit but also remain consistent with the mission of the enterprise. Unlike PMBs, which can pursue any market problem that promises the desired return on investment, social businesses are designed to solve specific social problems. This leads to more self-imposed restrictions on the social organization’s ability to adapt to market conditions than those limiting profit maximizing competitors. As a result, social businesses may need an entrepreneurial orientation even more than their profit maximizing counterparts to achieve long-term financial sustainability and to stave off the complacency, rigidity, and stagnation that can accompany organizational bureaucracy.

If businesses are going to emphasize social value more, managers and employees will likely need to monitor their company culture and continually revisit the ways they create, deliver, and capture social value, just as they have done with financial value. As such, new instruments are needed to measure individual perceptions of the current organizational environment to determine whether it is conducive to individual efforts to create social value.

A recent study published by Kansas State University professor of management Chad Jackson and colleagues developed the Corporate Social Entrepreneurship Scale, an instrument to help managers determine whether their organizational climate is conducive to creating social value. Based on their importance to corporate decision making and perceived trust, stakeholder salience, social proactiveness, governance and transparency were identified to be critical to the social corporate entrepreneurship activity of an organization.

Stakeholder Salience – how much consideration a group is given by managers in business decisions.

Social Proactiveness – socially proactive organizations seek to influence and change environments rather than respond out of necessity or survival. Proactive behaviors include identifying opportunity, challenging the status quo, and creating favorable conditions.

Corporate Governance – the policies and processes by which the firm makes decisions while balancing the interests of various stakeholders.

Transparency – comprehensive disclosure of performance at all levels (environmental, social, and economic) through advertising and promotions, product labeling, and government required disclosures.

What Should You Do

If your organization wants to increase its social impact, consider the following steps:

Company leaders should first decide their desired outcomes and goals with social value initiatives. The aim of the social initiative (along with why the goal is important to the overall mission of the organization) needs to be clearly defined to help ensure long-term social impact.

The business should then assess readiness by using an instrument, such as the CSES, to determine if specific areas need to improve before embarking on a social impact goal.

As with many business goals, effective social impact efforts often require careful selection of the leadership personnel and adequate resource allocation. The organization should commit to providing the leadership and resources necessary to achieve the social impact goal.